Intu says net rental income will fall in 2019
Intu Properties CEO warns year will be challenging due to a higher than expected level of company voluntary arrangements and slowdown in new lettings
Intu Properties, which was formed when real estate group Liberty International was split in 2010, says its like-for-like net rental income in 2019 will fall by up to 6% amid a turbulent period for UK landlords.
British property owners are grappling with company voluntary arrangement (CVA) processes, whereby financially distressed businesses renegotiate their leases or shut outlets, placing added pressure on rentals.
Major retailers are seeking CVA processes as they contend with a surge in online shopping and Brexit uncertainties. Debenhams, for instance, said last week it would close 22 of its 166 stores.
“We expect the remainder of 2019 to be challenging due to a higher than expected level of CVAs and a slowdown in new lettings as tenants delay their decisions due the uncertainties in the current political and retail environments,” said Matthew Roberts, who took over as Intu CEO at the end of April.
“Despite the current operating environment, I believe we have a very good business and am confident we can meet the challenges we are facing head on,” the former finance chief said.
Roberts plans to reduce Intu’s loan-to-value ratio to below 50%, from 53.1% at the end of 2018. As part of that strategy, the group recently sold a 50% interest in the intu Derby shopping centre.
Intu has said it will also look to sell its Spanish centres.
Intu said in a statement it tended to be a net beneficiary of CVA processes over the medium term because tenants’ stores in its centres “are typically among their best performing”.
None of the Debenhams stores marked for closure were in Intu’s malls, it said.
Roberts, who replaced long-standing CEO David Fischel, said Intu’s performance in the quarter to May 2 “has been stable”. However, the rest of 2019 would be more tough.
Intu's shares were 7.5% lower at R17.58 on Friday morning.